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powayseller
ParticipantI am not knowledgeable about investments overseas. I only know that the US economy is dependent on consumer spending, the consumer is dependent on housing appreciation to keep taking out money. Once housing stops rising, the consumer pulls back, and companies’ profits will fall, and stocks will fall. Also we have rising inflation and interest rates which are pressuring the markets.
Some believe that China will keep growing, even without the US consumer. Others believe China is dependent on exporting to us.
To be on the safe side, I sold all my equities. Perhaps you can make money in global funds. But which ones?
I am going to try Chris J’s trading system. I need $10K to open an account at a futures brokerage, and will get the orders off his website. It involves only 1-2 trades per week, which I call in to my broker in the morning. I hold it for several days, and then execute a sell. Simple enough. His method is up 60% this year, and he wins 90% of his trades. I am also trying some of the advice from the Zeal newsletter; they suggested a lead mining company in Canada. Yakamoto Forecast is recommending 100% cash position. But I will use a small amount of my money as play money in the bond futures (Chris J’s site) and commodities. Also may get Rydex Short funds, and some gold bullion after the pullback. It makes sense to hold a couple percent of assets in physical assets.
Perhaps money can be made in pawn shops, and others which prosper during recessions. Problem is: P/Es are over 25 for Proctor & Gamble and all publicly traded pawn shops. Isn’t there any good deal in the stock market these days? The whole darn thing is so overvalued right now.
I agree when equities fall we can get back in. Everything is cyclical. I was just pointing out that we are at the top now.
ParticipantSRPIX is invested in inverse of REITs, and does not track inverse of homebuilders at all. We’ve been through this topic before.
I would like to short the s&P and the homebuilders, but don’t know how. I will seek the advice of Chris J for this.
My retirement account is with Vanguard, in a brokerage account. I can buy anything I want. If you are limited in your options in your current account, move to Vanguard. When my husband worked for U-Haul and had only 5 options, I moved his money to Vanguard every quarter, and from there, the whole world was open to me! This is the biggest secret in 401k planning – your employer hates it when you handle your own funds, bec. their company hired sponsor doesn’t get the money. Do this: put all your 401k money into a money market, no load, and your company plan advisor gets no cut. Every month or two, move it to Vanguard or another brokerage account (IRA or 401K rollover). Buy stocks, index funds, mutual funds, commodities, whatever you want. Even CDs. I angers me that companies are manipulating their employees by not explaining this option. Every employer should offer a Vanguard type brokerage account for their employees. It’s highly unethical to limit investment options.
ParticipantThat’s what I was going to say, too.
I swear, PD is not a pseudonym for powayseller…
ParticipantJohn Talbott has extreme views, for sure. I e-mailed him, and we conversed a couple times. I disagree with his take on inflation. He believes the CPI figures are accurate, and I don’t. He believes inflation has been burned out of the system, and many of his assumptions are made on that premise. He did not respond to my last e-mail in which I argued why inflation is higher than the 2% government reported figure. Maybe he thought I was right and was speechless, maybe he thought I was clueless and didn’t want to waste his time with me, who knows?
ParticipantPD, from now on, I will just write “yes, what PD said”, because I agree with everything you say. All excesses overcorrect on the way down, and the chart on the Bubble Primer shows this. We will overshoot to 50% correction before we come back up to the baseline. That’s my prediction.
ParticipantI’m 100% sure of being right, so I made the move. But all good investors must consider all the angles.
Assume prices go down 15%, then climb back up. All I need to do is keep renting, because they’ll still be overvalued, and all assets revert to the mean. There are dozens of examples in history: tulips, florida swampland….
If for some odd reason, this time really is different, and I was attached to owning a house (which I’m not), I could buy back in at 15% less. That’s a savings of $120K on a $800K house. Even after closing costs and two moves, I’m ahead by $100K.
ParticipantPD is right. Why is anyone not able to sell right now? The longer you wait, the lower your profits.
I think in another year, when prices are down 20% and foreclosures are increasing, listings are increasing, and sales keep dropping, then those who said they couldn’t sell now, will wish they had. Take advantage of time, which is now on your side. Get out of Dodge before it’s too late.
May 17, 2006 at 5:34 AM in reply to: Is reverse mortgage a good way to “lock in” property profits ? #25503ParticipantA loan officer should answer these questions for you. It all depends on your loan/equity ratio and your FICO score. I’ve not heard of a balloon HELOC.
HELOCs are higher now than first mortgages, so the trend in the last months has been for people to refinance, instead of taking out HELOCs, according to Frank Nothaft from Freddie Mac. They do this even though the new mortgage rate was higher than the previous rate for more than half the borrowers. I think the HELOC rate is around 9-11%. Maybe someone on this forum has one, and can tell you.
Even a reverse mortgage must be over 7%. How could you invest for more than 7% return, guaranteed?
Also be careful about borrowing against your home, which is losing value, to buy something which could also lose value. Margin loans are making a comeback, which is by some considered a sign of a top. UBS AG’s Wealth Management said that 75% of its $10 billion in securities-based loan are used for non-securities purchases such as real estate, cars, and paying taxes. Once again, people are borrowing against their equities. As stocks plummet, margin calls will hurt some investors. The big rise in hedge funds causes news and price changes to settle within hours instead of months. So when the market turns down, I think it will set off a wave of selling.
Glad to see you back in the forums, leung_lewis.
ParticipantAmerican Real Estate Solutions estimates 15% of people with ARMs will default. so that’s 1 million people nationwide. The reason is that they won’t be able to handle the up-to-50% increase in payment. Since 1/3 of people who took out a mortgage loan (purchase or refi) have 0 or no equity, when house prices fall, they cannot just walk away; they are already underwater. If I find a study about the anticipated foreclosure rate, I’ll start a thread on it. The loan and equity data is not real clear, so there’s a lot of estimating going on.
The question I have for the people who got ARMs is: With interest rates at historic lows, why did you get an adjustable rate mortgage, and interest-only, or a negative-amortization mortgage? Interest rates rise and fall, and have nowhere to go but up. Why wouldn’t you take advantage of historic low rates to lock in the 5% or 5.5% rate?
I’ve read that people do it to purchase a bigger home than they could otherwise afford, or to be able to buy a home at all. In SD, most buyers couldn’t make a purchase without the help of the 1% ARM.
Perhaps you can offer some insight as to why someone got an ARM, and how that person will be able to make the payments when their mortgage goes up by 50% (from 2%+prime to 5%+prime).
Also wondering why not all those people are busy refinancing right now.
ParticipantYou must be my twin! Have you been reading my posts, bec. I have done exactly as you. Even down to selling all equities in the last 2 weeks, selling my house, going into asset protection mode. Why don’t you start some threads with what you’ve learned and how you got there? I’d like to hear more…
ParticipantIs this aerospace manufacturing related to military? These are cyclical jobs. Have you researched who are our aerospace competitors, and how we are faring against them? What is the job outlook for American aerospace? I don’t know. I’ve had good luck with e-mailing economists. If you have a well worded question, they actually write back. Start out by making a positive comment about something they wrote. Or check out their blog, if they have one. Some economists and business writers give e-mail addresses in their articles. I would write to many, and sift through the responses, for the ones which make the most sense. Lostkitty, if you come to Coronado this summer, I’d love to meet you. If you want to, we can both send our e-mail addresses to Rich, and he can forward them. I think he won’t mind.
ParticipantI welcome corrections to my 50% prediction. I got my prediction from the Bubble Primer chart, Per Capita Income/Median Price. This ratio is 64% over the historical average, and needs to fall by 50% to get back to the low point. (200% x 50% = 100%, the trough). If wages go up, the 50% figure will be smaller. But somehow, this ratio must normalize to 100%.
The price drop will be less than 50% if wages rise. Pretty unlikely, but possible.
The price drop will be greater than 50% if wages stay flat and the exotic loan fallout and job loss from RE related jobs feeds on itself, and becomes much worse than anyone expects.
The time to buy a house in SD will be when the front page of media is about the horrors of RE, and no one wants to buy property. This requires discipline and patience, but for me, who loves renting, I don’t care too much how long it takes.
ParticipantBy your definition, I am also on the sidelines, bec. I sold my house and am waiting for a correction. What are you waiting for to buy again?
ParticipantNow LookOutBelow has two girls he wants to marry 🙂 I share your prediction. Just curious, how you arrived at the recession forecast?
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